Intro
Liquid staking is an investment strategy that is popular among both beginners and experienced investors. Most users find this option attractive due to the passive income, minimal risks and low level of engagement.
As known, liquid staking involves locking assets in a liquidity pool for a certain period of time to receive a reward. However, unlike traditional staking, users receive additional tokens in return for staked assets, indicating their stake in the pool.
The advantage of liquid staking is the ability to use additional tokens in the DeFi space to generate extra income.
Rocket Pool is the most popular Ethereum liquid staking platform in the world, allowing users to deposit any amount of ETH and earn fairly decent rewards. Today Notum will take a closer look at the Rocket Pool protocol, highlight its main benefits and risks, and pay attention to its investment strategy for generating income in 2024.
Rocket Pool: The Essentials
- TVL: $2,748,000,000
- Average APY: 2.89%
- Risk Level: Low
- Blockchains: Ethereum
- Foundation Date: Sept, 2016
Rocket Pool is the largest liquid staking platform for Ethereum. The platform was founded back in 2016 and is still popular among ETH investors around the world.
As of January 2024, its Total Value Locked is over 2.7 billion, making it the second most popular liquid staking platform in the world after Lido.
Liquid staking with Rocket Pool provides users with the opportunity to deposit their ETH assets to a staking service provider to receive rewards. In return for investing liquidity, users receive a receipt token which shows their stake, which increases over time. Thus, the staking process on the platform is as simple and convenient as possible.
As said, by depositing their assets to the liquidity pool on Rocket Pool, users earn so-called rETH tokens, which can be used in the DeFi space for various purposes.
While the main ETH investment generates passive income, rETH can be traded on exchanges, used as collateral, and used in other DeFi operations.
In order to receive liquid staking rewards for ETH on Rocket Pool, a user only needs to invest 0.01 ETH or more. Thus, during the time the asset is locked in the pool, the investor will receive rewards equivalent to his contribution. However, if necessary, the user can unstake his ETH at any time without any lockup period.
In addition to liquid staking, Rocket Pool offers users an investment strategy such as node staking, which means that the user must hold and stake ETH, as well as operate an Ethereum validating node.
«To participate in Ethereum staking, individuals must hold & stake a minimum of 32 ETH & run an Ethereum validating node» - RocketPool.
Source: The Block101
Rocket Pool Rewards
Rocket Pool incentivizes participation in its network through multiple ways to earn rewards. Let's look at the main ones:
- Rocket Pool Protocol Token ($RPL)
RPL is the main protocol token on the Ethereum blockchain. Rocket Pool Protocol Token is used to manage the protocol DAO. In addition, RPL crypto can also be staked by node operators to receive rewards.
- Rocket Pool Staking Deposit Token (rETH)
rETH is a kind of tokenized deposit that represents the reward that the user receives over time on the Rocket Pool network.Thus, by depositing their assets into the protocol, users receive rETH which can be used in the DeFi space for trading, selling and other financial transactions.
- ETH token
For sure, by staking their ETH assets into the Rocket Pool, users will also earn rewards on their investments. However, Rocket Pool's APR for staking Ethereum may vary depending on the state of the network.
- Staking Pool Comissions
Users who operate nodes also receive commissions from the ETH assets placed in the pool. This way they have additional motivation to contribute to the development and safety of the network.
Why Invest in Liquid Staking with Rocket Pool?
As you know, there are now a huge number of different platforms for investing in liquid staking. However, Rocket Pool, which has been around since 2016, captivates with its reliability, security and ever-increasing TVL. However, let's look at the specific reasons why you should pay attention to this liquid staking protocol:
- Additional income. By depositing their ETH crypto into Rocket Pool liquidity pools, users can have access to their assets even while staking. By investing, the protocol provides users with rETH tokens that can be used for various financial transactions in the DeFi space.
- No lock-up period. While many platforms have a certain period of time they need to wait before withdrawal, Rocket Pool gives its users the opportunity to unstake their ETH without having to wait for a minimum staking period.
- Safety. Rocket Pool staking is famous for its non-custodial and trustless nature, as well as the proper level of decentralization, which gives users a guarantee of their assets’ safety. Moreover, the protocol has passed several serious audits, including Trail of Bits, Sigma Prime and Consensys Diligence, which indicates the proper level of reliability.
- Perfect Score. The official Ethereum website has a page explaining how liquidity pools work and recommending the best pools for investment. Exactly according to ethereum.org. Rocket Pool is the only platform with an excellent score.
- Community governance. Rocket Pool is a protocol that has a fairly large and wholesome community that plays a fairly large role in the governance of the protocol.
Source: RocketPool
Investment Strategies on Rocket Pool
If you own ETH assets and have decided to invest in liquid staking, choosing the right liquidity pool is a pretty important point. The investment strategy below will allow you to securely stake ETH and receive regular passive rewards.
RETH on Ethereum
Total APY – 2.89%, TVL – $2,496b
This investment strategy from Rocket Pool is the most popular rETH liquid staking pool in the world. Its Total Value Locked reaches almost $2.5 billion, while its closest rival, rETH pool on AAVE v3, has a TVL of only $113.54 million. Moreover, a high TVL means high pool performance and indicates a decent level of security.
A significant advantage of this strategy is that it is not subject to impermanent loss, which leads to a potentially low investment risk. In addition, this rETH pool gives investors the opportunity to earn from 2.5% to 3.5% APY without active management or involvement.
Source: Notum
Rocket Pool: Risks and Disadvantages
As you know, Rocket Pool is the most popular platform focused on Ethereum staking, but it is also not without risks and disadvantages. Despite the fact that the protocol has undergone several audits, which already indicate the proper level of security and safety of investments, before choosing Rocket Pool for liquid staking you should familiarize yourself with some nuances:
- Required ETH amount. While the Lido platform allows users to stake any amount of Ethereum they have, Rocket Pool requires a minimum amount of 0.01 ETH. Thus, if you do not have the minimum deposit required by the protocol, which is equivalent to $22 in January 2024, you will not be able to stake ETH on RocketPool.
- Smart contract risk. Like most other decentralized finance platforms, Rocket Pool runs on smart contracts to facilitate the staking process. However, as you know, smart contracts can be subject to bugs, vulnerabilities, or exploits, which can lead to loss of funds.
- Dependency on Ethereum. As you know, Rocket Pool operates on the Ethereum blockchain, which means the functionality of the protocol also depends on it. In other words, any problems in the Ethereum network such as network congestion can lead to deterioration in the performance of Rocket Pool.
- Market volatility. As known, the cryptocurrency market is subject to various fluctuations and price changes, which directly affects the value of staked assets. Thus, if the value of ETH falls, users will also suffer potential losses.
Therefore, if you are looking to invest with Rocket pool crypto staking, it is important to do your research, carefully examine the advantages and disadvantages of the platform and make sure that it suits your wants and needs.
Notum’s Verdict
Rocket Pool is a low-risk liquid staking platform for Ethereum that offers users options for earning passive income. Its friendly and intuitive interface is suitable for both experienced crypto investors and beginners who are just exploring the world of liquid staking. The platform offers the world's most popular rETH liquidity pool, which brings investors passive income from 2.5% to 3.5% APY. Despite the potential risks associated with smart contracts, market volatility and dependence on Ethereum, Rocket Pool has a strong position in the liquid staking market and offers profitable investment strategies for earning rewards.
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Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.